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Stanford Report, April 30, 2003

A human rights mission develops for MBA Class of '93 reunion

BY JANET ZICH

Jude Shao can't make it to his 10th-year reunion May 2-3, but he will not be forgotten. Shao, who graduated in 1993 with an MBA from the Business School, has been in prison in Shanghai for the past five years. At the reunion, he will be the subject of a panel discussion featuring John Kamm, founder and director of the Dui Hua Foundation, which has successfully intervened on behalf of many political prisoners in China. Garry Ohmert, Shao's roommate for two years at Qing Pu Prison, also will be there.

The discussion, open to interested others, will be held at 10:45 a.m. Saturday, May 3, in Room 170 off the interior courtyard of the GSB South building.

"We are asking people at Stanford to mention Jude when they have contacts in China," said Shao's classmate Chuck Hoover, who is coordinating the class campaign on Shao's behalf with classmate Caroline Pappajohn. "I will e-mail a white paper about the case to anyone who wants one," added Hoover, who can be reached at chuckh@alumni.stanford.org.

Shortly after graduation, with the backing of 16 investors, most of them MBA classmates, Shao established the American company China Business Ventures (CBV), which exported American medical equipment to China. By 1997, the company had an office in San Francisco and a subsidiary in Shanghai, where CBV employed 15 people. It seemed all was going well -- until July of that year, when three tax officials showed up at the Shanghai office for a surprise "special tax audit."

The auditors pounced on 53 invoices from two Chinese state-owned import companies that CBV had been working with. They said the invoices indicated CBV hadn't paid value-added tax (VAT) on several pieces of equipment. Shao said his company had paid the taxes to the Chinese companies, although he could not be sure they had passed on the money to the government. The auditors confiscated CBV's books. Later the lead tax auditor offered to return the books and drop the audit if the company would post a $60,000 bond. Shao saw his offer as a thinly disguised demand for a bribe and refused.

"I told him to get lost," he wrote a classmate some five years later. "I had set up the company's policy not to bribe any government officials in China. I am a Stanford MBA. I wasn't interested in unethical business practice. Our company had operated lawfully in China and paid all the relevant taxes. Yet corruption was so prevalent in China that our company was a rare species. It's hard to find a company that didn't evade tax and didn't bribe."

A longtime permanent resident of the United States, the Shanghai-born entrepreneur returned to San Francisco at the end of the month to be sworn in as an American citizen. A few months later CBV's bank accounts were frozen. The records that might have proved the company's innocence were not returned. Without them it could not continue to function. Back in San Francisco, trying to get a work visa from the Chinese consulate, Shao looked on helplessly from across the Pacific as 10 of his employees quit.

Shao was carrying his new American passport when he was stopped at the Shanghai airport the following April. He was detained in a hotel for five weeks and then formally arrested. He was jailed for a year before going to trial and claims he was held incommunicado for the first 26 months. He says the first occasion he had to meet his attorney, whose hiring had been arranged by the American consulate, was in court. There the prosecution presented what Shao insists was a fabricated confession, and he says he was not allowed to show evidence that would exonerate him. To his dismay, he also learned that one of the two importing companies he suspected of keeping the VAT was owned by the Shanghai Police Bureau.

China Business Ventures eventually was found guilty of falsely issuing VAT invoices and of tax evasion, charges Shao continues to hotly deny. On May 13, 2000, as CBV's general manager, Shao was sentenced to 15 years plus one and a half years on the two charges, to be served consecutively. He appealed, lost and two months later was transferred to Shanghai's Qing Pu Prison, where foreign nationals are held.

The American consul and Shao's older sister Jing Li (Jenny) are Jude's only conduits to the world outside Qing Pu, and they are each allowed only one 30-minute visit a month. They bring him food, magazines and newspapers and carry out his handwritten messages. In one letter to a classmate, Shao wrote he had to threaten a hunger strike before prison officials would give the consul an open letter, "An Innocent American Calling for Justice in China," to be distributed in the United States.

As for incoming mail, with no direct access to e-mail or fax, Shao wrote: "My sister prints out the incoming email for me and also receives faxes at her home. She then mails them to me in a letter every few days. The Chinese government scrutinizes every letter I receive." For a while, he says, "they took away my word processor and blocked my mail in violation of the U.S.--China consular agreement, the Vienna Convention and the United Nations conventions on human rights. ... I am harassed and threatened at times."

Jenny has made three trips to the States to update her brother's friends on his situation and recruit government officials and human rights advocates to his cause. Kamm of Dui Hua recently added Shao to the list of prisoners he discusses quarterly with the Chinese government; he also was instrumental in putting Shao on the U.S. government's prisoner list.

While others press for his release, Shao spends most of his time studying Chinese law and poring over the minutiae of his case. Accounting records Jenny salvaged from CBV's San Francisco office after the trial prove his company's innocence, Shao says. Claiming this new evidence, he has filed several petitions to the People's Supreme Court of China for a retrial.

"The courts never wanted to see the defense evidence that not only would have proved our innocence but also would have proved some very serious crimes committed by the Chinese state-owned companies," Shao wrote in his open letter. "This case is a simple tax case -- those who stole the taxes are guilty and those who paid taxes are innocent. Let's consider all the evidence. Let's find all the facts. Let's have justice in China!"

So far, China's Supreme Court has not responded.